NEFT in Banking: Full Form, Benefits, & Transaction Process

NEFT, or National Electronic Funds Transfer, is a well-established way to move money electronically between bank accounts in India. It's a convenient option because you can use it anytime, on any day of the year.

These days, there are many new ways to transfer money online, like UPI and digital wallets. While these newer options are popular, NEFT is still a reliable choice for many people. This is because NEFT has been around for a while and has built-in security features.

In this blog post, we'll take a closer look at how NEFT works.

What is NEFT in Banking?

NEFT stands for National Electronic Funds Transfer, a system in India for electronically moving money between bank accounts. This lets people, businesses, and organisations send funds to each other. NEFT transactions are grouped and settled throughout the day, usually every hour. It's a safe and easy way to transfer money, commonly used for things like salaries, bills, and online shopping.

Understanding How NEFT Works

Here's a step-by-step breakdown of how an NEFT transfer works:

1. Initiation: The process begins with the sender providing details like the beneficiary's account number, bank branch, and the transfer amount. This can be done through internet banking, mobile banking, or by visiting a bank branch.
2. Beneficiary Setup (if needed): If the recipient isn't already saved in the sender's account, some additional information needs to be added. This typically includes the beneficiary's account number and bank branch. This step only needs to be done once for each recipient.
3. Transaction Processing: Once initiated, the sender's bank forwards the transaction details to a central NEFT clearing centre. This centre sorts and groups the transactions received from various banks.
4. Settlement in Batches: NEFT transactions are processed in batches throughout the day, typically every hour. The clearing centre prepares settlement files for each batch and sends them to the respective banks involved.
5. Fund Transfer: Upon receiving the settlement files, the beneficiary's bank credits the funds to their account. Depending on the transaction time, this may occur on the same day or the next business day.
6. Confirmation and Tracking: Both the sender and beneficiary receive confirmation notifications from their banks upon successful transfer. This ensures transparency and provides a record of the transaction. Additionally, senders can often track the status of their NEFT transfers through their banking channels.

NEFT Availability

Previously, NEFT transactions could only be initiated during specific hours: weekdays from 8:00 AM to 6:30 PM. This has been changed by the RBI, making NEFT available 24/7, every day of the year. This includes weekends and public holidays.

Outside of regular banking hours, NEFT transactions are likely processed automatically using a system called Straight Through Processing (STP). This means banks can handle your transfer without needing manual intervention during those times.

Benefits of NEFT

Here are some of the advantages of using NEFT for transferring money:

1. Security: NEFT transfers happen electronically through a secure network regulated by the RBI, ensuring safe and reliable fund movement.
2. Cost-effective: NEFT charges are generally lower compared to other electronic transfers, making it a budget-friendly option.
3. Convenience: Transfers can be initiated easily using mobile or internet banking, eliminating the need for branch visits.
4. Wide availability: NEFT is accessible to any bank account holder in India.
5. Faster transfers: Transactions are processed in batches throughout the RBI working day, leading to relatively quick fund transfers.
6. Tracking: Users can track the status of their transfers through their bank accounts.

How to Transfer Funds through NEFT Online?

Here's how to transfer funds through NEFT online:

1. Log in to Your Net Banking Account. Enter your User ID and password.
2. Locate the NEFT Transfer Option. Look for ""funds transfer"" or a similar menu, then select NEFT.
3. Enter Beneficiary Details. Carefully fill in the beneficiary's account number, IFSC code, bank and branch name (if required).
4. Specify the Transfer Amount and Schedule (if available). Enter the amount you want to send and choose a transfer date and time (if your bank offers scheduling).
5. Review and Confirm Details. Double-check the beneficiary information and transfer amount.
6. Authorise the Transaction. Use your internet banking credentials or an OTP to finalise the transfer.
7. Confirmation. You'll receive notification via SMS or email once the transaction is complete.

How to Transfer Funds through NEFT Offline?

Here's how to transfer funds using NEFT offline:

1. Visit Your Bank Branch: Head to your nearest bank location.
2. Fill out the NEFT Application: Obtain and complete the NEFT application form from the bank staff.
3. Provide Beneficiary Details: Carefully enter the bank account information of the person you're sending money to. This includes their name, account number, and IFSC code.
4. Specify Transfer Amount: Indicate the exact amount you want to transfer.
5. Pay any Fees: If applicable, settle any transaction fees associated with the NEFT transfer.
6. Authorise the Transaction: Sign the NEFT application form to grant permission for the transfer.
7. Submit for Processing: Give the completed form to a bank representative for verification and processing.
8. Confirmation: Once everything is verified, you'll typically receive confirmation via your registered mobile number or email address.

NEFT Transfer Charges and Fees

NEFT vs UPI vs RTGS: A Comparison Table

Frequently Asked Questions (FAQs)

1. What are the timings for NEFT transactions?

You can initiate NEFT transactions 24/7, any day of the year. If the transaction is done during banking hours (typically Monday to Friday, 8 am to 7 pm), the receiver may receive the amount within those hours. However, for guaranteed instant transfers, consider using an alternative option like RTGS, which may have a minimum fee.

2. Is there a limit on the amount I can transfer via NEFT?

The Reserve Bank of India (RBI) doesn't set a limit on NEFT transfers. However, individual banks might have their own limits. Many banks allow transactions of any amount, so it's best to check with your bank for their specific policy.

3. How long does it take for an NEFT payment to settle?

NEFT transactions are settled in batches. It can take about two hours after the batch settlement for the beneficiary's account to be credited.

4. Can I cancel an NEFT transfer?

Unfortunately, once an NEFT transaction is initiated, it cannot be cancelled or stopped.

5. Can I do an NEFT transfer on Sunday?

Yes, you can initiate NEFT transfers on Sundays using net banking or mobile banking. However, bank branches are typically closed on Sundays, so you won't be able to initiate an NEFT transaction in person.

6. How long does it typically take for the money to transfer via NEFT?

While NEFT transactions are processed in batches every 30 minutes, it can take anywhere from 30 minutes to a full day for the funds to be credited to the beneficiary's account depending on various factors.

7. Are there any charges for NEFT transactions?

As of January 2020, the RBI has directed banks not to charge any additional fees for online NEFT transactions. However, some banks may have charges for NEFT transactions initiated at a branch.

8. Is an IFSC code required for NEFT transactions?

Yes, the IFSC code is a crucial element to add a beneficiary's bank account to yours. Once the beneficiary is added, you can initiate the NEFT transaction using their account details.

9. Can I transfer money internationally using NEFT?

No, NEFT is designed for transfers within India only. You cannot use NEFT to transfer money to bank accounts outside the country.